Delta Air Lines: SkyTeam Offering $1.02 Billion Financing To JAL
CHICAGO -(Dow Jones)- Delta Air Lines Inc. (DAL) and its SkyTeam alliance
partners said that they would provide a $1.02 billion funding package to lure
stricken Japan Airlines Corp. (9205.TO) from the rival Oneworld alliance.
The proposal includes a $500 million equity injection from SkyTeam, a $300
million revenue guarantee from Delta and a further $200 million in asset-backed
funding, as well as $20 million or more in transition costs for the switch.
The move marks Delta's first public effort to wrestle JAL from Oneworld in the
face of a rival offer from American Airlines, a leading member of the alliance
alongside British Airways PLC.
American, a unit of AMR Corp. (AMR), has teamed up with private equity group
TPG to develop an alternative funding plan for JAL.
American and Delta each started talks with JAL earlier this year toward a
partnership with the Japanese carrier. Initial discussions focused on whether
the U.S. carriers would inject as much as $500 million in capital into JAL,
which is battling mounting losses that have seen it seek aid from the Japanese
government.
JAL already has links with a number of SkyTeam members, including code-sharing
deals with Air France-KLM (AFLYY) and Korean Air Co. (003490.SE). Both airlines
are expected to contribute to any equity injection from the alliance.
JAL's links with Oneworld partners include extensive code sharing with
American, notably through its Chicago hub. A shift to Delta and SkyTeam may
create some short-term disruption to traffic flows that the U.S. carrier is
offering to cover.
JAL is cutting routes and jobs as it struggles with an inefficient network and
the burden of its debt load and pension deficit. Even so, both U.S. carriers
view JAL as a valuable prize with access to congested Tokyo airports and other
connection points in Asia. Star, a third global airline alliance, is already
allied with All Nippon Airways Inc. (9202.TO).
The pursuit of JAL is also tied to ongoing talks between the U.S. and Japan to
liberalize their restrictive aviation agreement. Negotiations are due to resume
next month, with both sides aiming for an open-skies deal that would lift
restrictions on the number of carriers and flights operated between the
countries.
Such a deal could then open the way for JAL and its U.S. partner to seek
antitrust immunity to deepen co-operation and coordinate schedules, fares and
marketing.
-By Doug Cameron, Dow Jones Newswires; (312) 750 4135; doug.cameron@
dowjones.com
(END) Dow Jones Newswires
11-18-090057ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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